Which Statement Relating to Comparability Is True

question 7

Multiple Choice

Which statement relating to comparability is true?

• A) It requires an entity, as far as possible, to use the same accounting method from year to year.
• B) It means a company can never change an accounting method.
• C) It means all firms in the same industry should use the same accounting methods.
• D) It means the same depreciation method must be employed for all classes of non-current assets.

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Definitions:

Retained Earnings

Retained earnings refer to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, preparing the books for the next period.

Closing Entry

A journal entry made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Revenue Accounts

Revenue accounts are those used in accounting to track the income generated by a business from its normal operations.